There is a bit of a meme around that the MSM are giving the LNP Coalition a free ride in government. On Friday the Australia Financial Review did its bit to buck the trend by asking the above question in an editorial.
When federal Industry Minister Ian Macfarlane spoke about a “final” assistance package for GM Holden last week, The Australian Financial Review took it as a sign that someone was finally standing up to the car makers’ protection racket. But Mr Macfarlane’s latest comments indicate a more protectionist mind-set. He agreed that Australia “needs” a car industry. He wants to reverse Ford’s decision to cease manufacturing cars in Australia after 2016. He wants an Australian industry to make cars that are driven “all over the world”. And he flags the option of an Australian car industry that is “supported by the government long term”. “I’m going to do everything I can to work with the companies to make sure that car workers’ jobs are protected, so we can have an industry long-term, so that Australia can be proud of its industry base,” he said on Thursday.
Has this normally sensible minister gone mad? It’s one thing to politically show you are doing everything you reasonably can to keep an industry going. But it’s another to use the language of the mendicants and rent seekers…
The AFR says that putting uncompetitive industries on permanent subsidy mocks Tony Abbott’s vow to make Australia open for business. It says that Joe Hockey and company should stand up to this lunacy.
At stake is whether the Abbott government has the wit and gumption to tackle the serious task of reviving Australia’s stalled productivity growth. Mr Macfarlane should be the first person to recognise this.
Plain words indeed!
Ian Macfarlane is one Abbott minister for whom I have a bit of grudging respect. Not much loved as president of the Queensland Graingrowers Association before entering politics he has always struck me as grounded and pragmatic. I think he’s been given the task of saving the car industry in Australia without using subsidies, but his comments suggest he knows that without subsidies the car producers will walk. They speak of “co-investment”. I believe it’s standard for countries that manufacture cars only 13 of which have industries integrated from design to shop-room floor.
Before you join the chorus of people calling for an end to such subsidies, have a read of Remy Davidson at The Conversation. The subsidies are entirely unremarkable and vanishingly small, he says. I did like this bit:
Australia has first-rate engineers and builds world-quality suspension and braking systems, develops advanced composites and innovative alloy technologies.
Australia also builds second-rate cars. It has a third-rate managerial class and fourth-rate governments.
He does suggest that the future may be in component manufacturing rather than in making complete cars. Essentially with our high dollar due to the ‘Dutch disease’ and the ‘resource curse’ we need to find high value-added, low volume niche markets. Davidson suggests that even here we need the volume of the domestic market. Part of the argument is that many component manufacturers are insufficiently diversified and insufficiently established in export markets to survive the demise of domestic car manufacturing.
There is also the question of opportunity cost. Is supporting car producers the best way of spending x dollars?
There is a claim that:
The Australian cleantech sector boasts revenue of $29 billion a year and employs 53,000 people, making it larger than Australia’s automotive manufacturing industry and one quarter the size of the country’s entire manufacturing sector.
I would query the last bit. Sources consistently put employment in manufacturing as close to a million. This site puts employment at 941,400 and exports at $87 billion or about 35% of Australia’s merchandise total.
I understand the Australian ship building industry is larger than the car manufacturing industry.
At present, Australia accounts for 30% of the international market share for aluminium shipbuilding.
I understand that the US Navy use some of our aluminium catamarans in their overseas operations. Ironically, the can’t take them home because of the Merchant Marine Act of 1920, also known as the ‘Jones Act’.
The question is raised as to whether car manufacturing is a keystone industry, as often claimed. Pillip Toner suggests that it is:
Consider the car industry. It draws on an extraordinarily wide-range of advanced technology and services, advanced metallurgy, machining. Consider the millions of lines of code that go into engine management systems and safety systems of modern vehicles.
Australia is just one of 13 countries in the world that have the capacity to go from the drawing board right through to the production line and the showroom – and every country that has that capacity seeks to nurture its industry. The modern motor vehicle industry sits at the very heart of a national input-output system at the very heart of its national science and technology base.
Here’s an Industry Innovation Council paper on manufacturing trends to 2020.
In other criticisms of the Government, business and the AFR are of course calling for industrial relations reform and microeconomic reform generally. Heather Ridout was even suggesting that increased expenditure on education and infrastructure would promote productivity.